Also, Google isn't preventing Microsoft from creating a Youtube app, they are only requiring that it meet certain requirements. Since Microsoft is a direct competitor in the search (and therefore advertising) space, it's not unfounded that Google do what they're doing.
I personally think it's crap, however Microsoft brought this on themselves by blatantly violating the Terms of Service.
However, when all is said and done, Microsoft deserves it -- they are, after all responsible for Internet Explorer and while it isn't related to Youtube, they deserve to suffer for all of the hours and hours developers have spent trying to make their products compatible with that hell-demon of a browser.